I hope not a precursor of things to come
As has been in the past the railways which employs huge amount of manpower and is an infrastructure industry that can provide a huge fillip to economic growth is not likely to add to economic growth in the next year and maybe also the following years given the fact that as usual there is no focus on infrastructure buildup in terms of laying tracks, improving passenger amenities and infrastructure etc.
I hope this is not a precursor of things to come out of the budget or other actions of the government on the economic front. Like I mentioned in one of my previous articles that China is using its investment in railways for a big economic boost and also to improve connectivity across the country. It is using it to improve the cost structure in logistics and also link up inaccessible areas. After the large scale investments into roads and urban infrastructure now the Chinese government is focusing on railways as a big driver of the economy.
I had expected a big focus on capital expenditure from the railways side which has not really come through
Let’s look at some statistics for the Indian railways on the other hand
-The cash surplus and operating ratio (which shows the money available after meeting revenue expenditure) has deteriorated significantly from 88.3% to 92.5% thus leaving very less money for capital expenditure
-There is hardly any provision for up gradation and the capital fund for the same has declined by 87% for the current year to Rs 642 crores
-Although the outlay for procuring wagons, carriages etc has increased by around 10% to Rs 12900 crores it is pathetic in the context of the fact that every year the procurement targets are not met. Also given the low prices of steel, aluminum etc. the cost of these would be lower by nearly 40% in the current year and this is an ideal time not only to reduce procurement costs but also provide this as a counter cyclical boost to the economy
-Although not stop trains are proposed between major stations, how it will be implemented is a question mark as the rail infrastructure will find it difficult to support such trains given the congestion on trunk routes
-As we have seen in the past modalities of working out development of infrastructure on PPP basis require a huge amount of time to be spent and then working out and awarding projects is again a long drawn affair. I believe that the up gradation of 50 stations to world class stations will be a non starter at least for this year where the actual boost to the economy is required. Moreover the government tends to have unrealistic expectations of its share in such projects and this further leads to delays.
-The proposal for usage of land banks could be a non starter in the near term due to the oversupply on the real estate side all over the country. However it can takeoff only if these land are provided at extremely competitive terms.
-The outlay on setting up new lines, gauge conversion has actually gone down by 12% instead of increasing.
Not let us look at some historic statistics for railways
-The length of routes which the railways carries goods and people has remained virtually unchanged since 1980.
-The carriage carrying capacity of all railway wagons has come down since then by over 10%. The number of locomotives has also come down by 25%.
-The average speed of freight movement in India is just 23 kmph.
-The new freight corridors were proposed several years back and were supposed to transform the entire system. However have been total non starters
-The super fast trains of more than 30 years back run slowly than what they did at that time. Worldwide the speed of express trains globally has gone upto over 200 kmph, whereas in India it is not more than 70kmph.
I believe that overall the thought process behind the railway budget remains very socialistic. However without improvement of the quality of services even this will not be successful as a populist agenda. I hope that on other fronts of infrastructure development like roads, ports, and power etc. the thought process will be more dynamic.
A hope that Mondays Union Budget will be more dynamic and growth oriented.